No TEP-id response to proposed Arizona rate changes

A packed house at the Arizona Corporation Commission indicated intense public interest in proposed rate changes that critics say punish solar customers but which Tucson Electric Power says are necessary so they can invest more in solar.

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When Tucson Electric Power (TEP) proposed its new pricing plans for users of private solar distributed generation (DG) systems, it’s doubtful they expected overwhelming public response. After all, rate design and implementation isn’t typically something most people try to understand. They just pay their electric bills every month and move through their days glad the air conditioning turns on and the lights are powered as twilight descends on the Arizona desert.

Judging from the standing-room-only meeting of the Arizona Corporation Commission (ACC) on Monday, however, solar customers – both those opposed and those in favor of TEP’s proposal – are not typical electricity consumers. And though the public-comment session lasted nearly three hours, everyone took the opportunity to express their feelings about the new rates.

At issue are rate changes proposed by TEP following an ACC ruling last year that, according to TEP spokesman Joseph Barrios, called on utilities to treat DG users as a separate customer class, with rates that reflect their specific characteristics.

Under TEP’s proposal the solar export rate, or the rate TEP pays solar customers for the excess electricity they produce, would drop to around 10 cents per kilowatt-hour (KWh), a rate that would be locked in for 10 years. This export rate would be adjusted annually to reflect changing prices, but customers who go solar could keep using their initial export rate for up to 10 years before being subject to market price adjustments, according to the utility’s website. Also, the rate would not be allowed to fall more than 10% annually.

TEP would also move residential solar customers on to a three-part rate with a demand charge, or on to a time-of-use (TOU) rate with a monthly “grid access charge” of $3.50 per kW-DC installed. Additionally, solar customers would pay an extra $3/month in their basic service charge ($13 total) compared to other TEP customers on similar residential demand or TOU rates.

Such discriminatory charges on solar users, including demand charges, are often frowned on by regulators. According to the North Carolina Clean Energy Technology Center (NCCETC)‘s United States of Solar report, no state regulatory body has ever approved a utility request to impose demand charges on residential customers to date, as they are seen as too complicated and unpredictable. To date, the only utility known to pv magazine which has done this is Arizona cooperative Salt River Project, which is not subject to state regulation.

Louis Woofenden, engineering director at Net Zero Solar, a Tucson-based installer, said he was pleased that so many people turned out to offer their opinions on the proposed changes and that a common theme emerged – people in Tucson love solar, and they want to preserve the opportunity to invest in rooftop solar for their homes.

As Woofenden sees it, TEP is obscuring the real costs to rooftop solar customers that would result from these rate changes. He believes the proposed rates create uncertainty in the market for those that want to add solar to their roofs. When coupled with payback times he has calculated as between 11 and 16 years, he fears the new rates would devastate the rooftop solar industry in southern Arizona.

“Local Tucson installers have made clear what TEP doesn’t want to admit, which is that the rates they are proposing would make rooftop solar practically uneconomical if approved,” Woofenden said. “TEP and their surrogates have quoted savings amounts for solar under the new rates, but without considering up-front costs, solar savings are an irrelevant metric. I’m sure I’d save money on gas if I bought a luxury electric car for $70,000, but that doesn’t mean it’s a great investment.”

Barrios counters that under the current system, one where the ACC upended with its decision in December to end net metering, users of private solar power systems pay only a small fraction of the costs TEP incurs to provide service, so other customers pay higher rates to cover those costs.

“We’re trying to keep electric service affordable for all customers,” Barrios said. “Under our current rates, users of private solar power systems pay only a small fraction of the costs TEP incurs to provide service, so other customers pay higher rates to cover those costs. Our proposed rates for new users of rooftop arrays would recover a more equitable share service costs while preserving significant bill savings for customers who install new solar power systems.”

Barrios says new solar customers with average usage would still save $70 or more per month.

Not all TEP customers oppose the proposed changes. One residential customer who offered comments at the hearing said she had installed solar with the help of a TEP program that allowed her to work with a private company for the installation. Otherwise, she said, she would not have been able to afford solar if she’d done it on her own without the utility’s support.

“I am thrilled that TEP supports investing in more solar, and they need to be financially strong to do this,” she said. “This will help more customers go solar in the future.”

TEP also received support from the Consumer Energy Alliance (CEA), a Washington-based advocacy group that lobbies for energy issues for its members, which includes “airlines, truckers, manufacturers, factories, farm groups, and energy producers of all varieties.”

The “energy producers of all varieties” claim is somewhat undercut by the group’s own website, which lists 87 energy-production members of which only two are clearly related to renewable energy. The overwhelming majority of the others appear to be oil, gas, “clean coal” and other fossil-fuel supporting companies.

Nevertheless, James Voyles, senior director, policy counsel for CEA, said the group believes solar energy has the ability to change the face of electricity generation, but it’s important to get the policy right.

“CEA is present to speak in favor of TEP’s proposal because the plan takes substantial steps towards allowing solar to proliferate, ensuring a robust electric grid and providing consumers with fair electric rates,” Voyles said. “While it has many tenets, TEP’s proposal is founded on the principles of consumer choice, competitive rates and fair dealings with all solar and traditional energy users. Most importantly, it advances solar at rates that work for everyone.”

“TEP’s proposal overreaches in just about every respect,” Rich said. “Not only are they asking for an aggressively low export rate that does not fully recognize the benefits of exported solar power, they are trying to reach into people’s homes, behind the meter, to charge customers more just because they lower their electric bills by generating some of their own clean solar energy.”

“Remember, people can lower their bill any number of ways; by installing LED lights, buying double-pane windows, or even just turning the air up a few degrees, but it is only when the customer uses solar to lower their bill that the utility wants to hit them with punitive rates and charges,” Rich continued. “That is just not fair.”

Woofenden said he hopes the ACC will take consumers’ and installers’ comments into consideration and adopt something “more reasonable” than what TEP is proposing.

“The solar industry in Arizona certainly understands that things are changing with the end of net metering,” Woofenden said. “But this proposal makes the rates adopted in the Arizona Public Service [Arizona’s largest utility] settlement look downright magnanimous.”

Another hearing on TEP’s proposal is scheduled for late October.

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Frank Andorka

Frank Andorka has been writing professionally for nearly 29 years and spent nearly 20 years in trade publications. He was the founding editor of Solar Power World and has covered all aspects of the solar industry from policy to panels and everything in between.

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